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Diesel Tops $5 a Gallon as War Disrupts Supply Chains
Surge Comes as Strait of Hormuz Remains Closed
US dieselrose above $5 a gallon for the first time since December 2022, the latest sign of surging fuel price pressures menacing the global economy as the war in Iran continues to disrupt energy supplies.
The nationwide average retail price reached $5.044 a gallon on March 16, according to the American Automobile Association, up by more than a third since the conflict began.
The surge in prices comes as the Strait of Hormuz — through which about a fifth of the world’s oil usually transits each day — remains largely closed to traffic. Crude oil prices have topped $100 a barrel, but the rally has been even more acute in markets for products that consumers actually use like gasoline, diesel and jet fuel.
Diesel is the lifeblood of the global economy. Across the world, it powers freight, agriculture and construction industries. Any spike at the retail level will ripple through the broader economy. Prices have surged faster than most other petroleum-based products because Persian Gulf refineries are major suppliers, exposing consumers in the U.S., Asia and Europe.
“We are not seeing operational disruption at this stage, but the economic impact is direct,” said Pavel Kveten, CEO at Girteka Logistics, one of Europe’s largest trucking companies, when asked about the impact of higher diesel prices.
The company adjusts its pricing weekly based on oil prices and “this means higher fuel costs can be reflected in transport rates within days rather than months.”
22 states now with average diesel prices above $5/gal, SC, IL and ID are likely to soon join, making it half of states, 7 states clinging on to sub-$4.50/gal diesel: OK, KS, MT, NE, SD, ND, MO — Patrick De Haan (@GasBuddyGuy)
In Europe and Asia, jet fuel has soared above $200 a barrel and fuel oil — usually a product that trades lower than crude futures, but one that keeps shipping moving — is now close to $140 a barrel. Countries are adopting increasing levels of protectionism in order to keep fuel at home and shield consumers from the higher costs.
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In some U.S. states, diesel prices had already surpassed the $5 mark. Prices for residential heating oil, which is effectively interchangeable with diesel, have alsoclimbed above $5, according to the U.S. Energy Information Administration. For President Donald Trump, a prolonged surge in fuel prices could weigh on midterm election prospects later this year.
South Korea’s Industry Minister said on March 17 that his country will set a cap on the volume of oil product exports by its oil refiners. Last weekChina’srefiners began canceling agreed export cargoes for gasoline and diesel.
